Wednesday, October 29, 2014

Fatca chance, Thomas

According to Thomas Piketty, a professor at the Paris School of
Economics, the main economic problem in developed countries is
inequality. He believes it takes precedence over other economic concerns
like poverty, unemployment, or slow economic growth. In his influential
book, Capital in the Twenty-First Century,[1]
Piketty argues that inequality is rapidly intensifying with no end in
sight. He says a solution is vital, and he claims to have found it:
extremely high income tax rates on upper-income taxpayers along with a
global wealth tax.

So Schuyler uses a taxes and growth model to estimate what exactly would happen if the U.S. took up Piketty's recommendations, and finds that;

A wealth tax in the United States would reduce investment, wages, employment, incomes, and output.

Piketty’s basic tax would depress the capital stock by 13.3
percent, decrease wages by 4.2 percent, eliminate 886,400 jobs, and
reduce GDP by 4.9 percent, or about $800 billion, all for a revenue gain
of less than $20 billion.

....

All income groups would be worse off under a wealth tax due to
decreased economic activity; in the second scenario, the after-tax
income loss for the top quintile would exceed 10 percent, but the losses
for all lower quintiles would be in the 7 to 9 percent range.

Piketty misery loves company.

Piketty’s only major concern about the viability of a comprehensive
wealth tax is whether it would be enforceable. He suspects taxpayers
would react vigorously and try to hide or recharacterize as much of
their wealth as they could. To minimize evasion and avoidance, Piketty
recommends that financial institutions be required to report much more
information to governments, that governments step up tax enforcement,
and that the wealth tax be imposed globally.

Regarding financial reporting, Piketty points to the U.S.
government’s Foreign Account Tax Compliance Act (FATCA) as a good first
step, although “insufficient.”[18] (Notwithstanding Piketty’s praise, FATCA has stirred international complaints of American heavy-handedness and bullying.[19] It has also caused enormous difficulties for Americans living abroad in finding banks willing to open accounts for them.)